After going straight up for two days, the Treasury market faltered yesterday, resuming its see-saw trading pattern.
During the day, bonds were up as much as 3/s but by the end of the day, most securities have given back their gains.
At the long end, the Treasury's 30-year bond ended up 2/32 to yield 5.93%.
The bond had been up 12/32 to yield 5.91% in the morning. But by the late afternoon, the 30-year had given back all that gain and more. At 4:00 p.m., eastern standard time, the long bond was down 1/32 on the day to yield 5.94%, only to recover slightly by the close.
Trading got off to a strong start with market participants hoping Friday and Monday's rally would live for another day.
For most of last week, each upward draft was quickly snuffed out by sellers. But starting Friday and continuing Monday, the 30-year rallied past all obstacles. Traders attributed the rally to the change in sentiment by the Federal Reserve Open Market Committee.
On Friday, FOMC minutes revealed that the committee favored keeping short-term rates unchanged. The committee voted unanimously for a neutral outlook at its Aug. 17 meeting. In previous months, the FOMC has favored raising rates to combat inflation.
The rally brought the yield on the 30-year from 6.06% at the close last Thursday to 5.94% Monday night and to a low of 5.91% during trading early yesterday.
But all that changed later in the day. Reverting to the trading pattern of early last week, sellers emerged and the long-end lost its modest Tuesday gains in the afternoon.
The intermediate market was quiet throughout the day. The 5-year note ended unchanged. The 7-year note ended down 1/32 to yield 4.86% and the 10-year notes finished down 1/32 on the day to yield 5.28%.
With positive economic news from the Johnson Redbook survey of retail sales and the the Conference Board's estimate of consumer confidence, the short end of the market slumped.
Yields on 3-month bills finished up 2 basis points to 2.96%. The 6-month bill was up 3 basis points to 3.12% and the 1-year bill was up 1 basis point to 3.31%.
The Redbook reported retail sales up 2.3% for the four weeks ending September 25 from the previous four week period. Compared to the same period last year, retail sales were up 10.2%.
The Conference Board reported consumer confidence at 62.6 in September, up from 59.3 in August and slightly higher than expected.
In a regional breakdown, the largest gains from August were in the New England, the South Atlantic, the South Central, and the Mountain regions.
The Treasury Department announced the next weekly bill auction will total $23.6 billion, up $1.2 billion, also pressuring the short end.
Today, the Commerce Department will release the latest revision of second quarter gross domestic product. The preliminary report pegged the GDP up 1.8% for the quarter and most economists expect that figure to stand.
On Thursday, personal income and consumption figures could have far more impact. The consensus estimate calls for a 1% increase in August income, following a 0.2% drop in July. Anything below that could ignite the market and send the 30-year below 5.90%, traders said.
Consumption is expected to rise 0.3% to 0.4% for August after posting a 0.4% rise in July.
Initial jobless claims for the week ending September 25 are expected to be down 5,000 to 7,000. Claims posted a surprisingly large jump of 11,000 the previous week.
In the futures market yesterday, the December Treasury contract was up 8/32 to 120.